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Carbon Tracker Initiative Identifies Oil Assets’ Climate Risks

8 May 2014: A report released by the Carbon Tracker Initiative (CTI) identifies the most likely assets in the oil sector to become stranded due to climate risks. Titled ‘Carbon Cost Supply Curves: Evaluating Financial Risk to Oil Capital Expenditures,' the report is the first in a series of reports identifying the riskiest and most expensive projects in the oil, gas and coal sectors.

Representing a new generation of financial analytical research that translates climate science and the carbon budget into the language of financial markets, the report seeks to empower investors to better evaluate spending plans in the sector and encourage financial regulators to consider the need for company disclosure on oil price sensitivities, demand assumptions and impairment tests.

The report provides resources to: improve investor understanding of financial risk under different demand, price and emissions scenarios; and, using a carbon supply cost curve, evaluate how well companies will be able to adapt to a low-carbon future.

Speaking at the launch of the report on 8 May 2014, in London, UK, Christiana Figueres, Executive Secretary of the UN Framework Convention on Climate Change (UNFCCC), underscored the need to quickly move towards a low-carbon economy, praising the report for giving investors "unprecedented and unbiased insight into the high risk of business as usual and investing in high-carbon – a need increasingly recognized by shareholders, students and congregations that support divestment and diversification.” The event also included prominent representatives from the financial sector, including Martijn Rats, Head of European Oil & Gas, Morgan Stanley, and Craig MacKenzie, Investment Director, Aberdeen Asset Management.

The report includes a set of eight recommendations for asset owners and managers in the oil sectors who will be stewarding the estimated $1.1 trillion in capital expenditures earmarked for high cost oil projects through 2025.